Industry News

One might believe the above headline contains misleading information, particularly when we here at MetalMiner have long advocated that countries (and companies) that pursue clean energy sources as well as technologies will need to secure new sources of supply for their rare earth metal needs. (As we all know by now, China controls over 97 percent of rare earth metal production.) So when news hit the press over a week ago that the Malaysian government had ordered an environmental review of Lynas’ Advanced Material Plant before it could commence production, the proverbial alarm bells began to ring. Not only did Lynas take a hit in its share price (and Molycorp, conversely, received a bump), but good old – NIMBY (not-in-my-backyard) politics reared its head, putting pressure on the Australian-based miner.

Local residents and activists expressed concern about radiation leakage and according to a story in The Australian, a Mitsubishi refinery closed back in 1992 due to pollution problems. In addition, the nuclear power problem in Japan has exacerbated the issue, even though as the story noted, the technologies used in rare earth processing differ from nuclear technologies.

The case with this Lynas plant in Malaysia centers around a more fundamental environmental concern: are companies locating plants/facilities in different regions of the world to sidestep environmental concerns?

Before we attempt to address that question, remember folks, we can’t have our cake and eat it too. We can’t have a world of “clean energy without some of the “dirty activities that go along with the development of the clean technologies. Specifically, mining is nearly always a dirty process. Consider some of these statistics from a recent Bloomberg piece on China’s rare earth industry pollution issues: China’s rare earth industry each year produces more than five times the amount of waste gas, including deadly fluorine and sulfur dioxide, than the total flared annually by all miners and oil refiners in the U.S. Alongside that 13 billion cubic meters of gas comes 25 million tons of waste water laced with cancer-causing heavy metals such as cadmium, according to the story.

In the case of rare earth metals, thorium, a naturally occurring radioactive element, commonly appears in the ores of other rare earth metals. The processing of the rare earth ores generates this radioactive waste.

At a recent REE conference in China, Daniel McGroarty of Carmot Strategic Group (and also a speaker at our recent International Trade Policy Breaking Point Conference) told MetalMiner the subject of “exporting pollution came up during one of the panels and Cooper Lee of Lynas Corp. offered a spirited defense of his firm’s environmental policies in regard to the Malaysian project.” According to McGroarty, Lee stated that Lynas had implemented the exact same environmental plan in Malaysia as it would for a plant in Australia.

Lynas was unavailable for an interview or any additional comment for this post.

The battle between corporations/governments and unions, from state pensions to auto companies’ legacy costs, has been distilled for the metals world with the ongoing negotiations or lack thereof between Honeywell, the energy and technology giant, and the United Steelworkers Union (USW). Honeywell and the USE have clashed over Honeywell’s uranium processing plant in Metropolis, Ill., the only of its kind in the US, according to a New York Times article.

About 230 USW workers have been on lockout since June 28, 2010, and are still picketing Honeywell over safety and seniority issues, according to a recent press release. On Monday, USW local 7-669, representing workers from the Metropolis plant, and UNITE, which represents Honeywell’s nuclear workers in the UK, staged a demonstration in Morristown, N.J., ahead of a Honeywell shareholders meeting to make their position heard. This is the latest in long tussle between the company and union workers, the focus of which is the potential danger that uranium conversion poses to workers.

“We deal with hydrofluoric acid, said Darrell Lillie, president of United Steelworkers Local 7-669, quoted last August in the Times. “We make fluorine. This is bad stuff. The least we feel like we could have is good medical benefits when we retire. (The article specified that the plant converts milled uranium into uranium hexafluoride UF6.)

Alternately, Honeywell maintains that the workers are failing to understand that the company would be incurring large losses, to the tune of $20 million in 2010. “Unfortunately, the union has demonstrated very little desire to reach a mutually beneficial and workable agreement that acknowledges the economic realities of the plant, Peter Dalpe, a spokesman for Honeywell, told the Times.

The last time the two sides sat down together was April 19 and 20, and according to this USW local’s website, not much happened: “There was a tentative agreement made on job bidding and movement. There were discussions about seniority, which according to [Honeywell’s] web site was agreed upon during the last sessions.  Talks today moved very slowly¦

A crux of the negotiations is retirement compensation in the form of health benefits to offset the dangerous work uranium conversion and fluoride production requires. Workers contend that the plant’s toxic processes cause cancer. They’ve erected white crosses in the plant’s shadow that represent those workers that have died, and others who are suffering. Members of the EPA and the Nuclear Regulatory Commission have been investigating how Honeywell gets rid of their sludge, which was the major point of contention that sparked safety alerts. An NRC spokesman said that the on-site regulators monitoring the plant were satisfied that all requirements were being met.

Clearly, this issue represents a conundrum between plant owners/operators and union workers, mostly to the point of providing workers with an adequately safe environment. The union should absolutely have the right to lobby for workers’ safety, but when the retirees and other hastily trained replacements from Louisiana who are coming in as “scab workers could potentially cause more harm to plant safety operations, as has been reported, we could have a much larger problem at hand.

Where exactly should the balance between dangerous work and fair compensation lie? And how can we possibly get to the bottom of proving whether companies’ practices directly cause cancer? Tell us your thoughts.

–Taras Berezowsky

Imagine hanging hundreds of feet above the ground on a rock face with nothing but small, fabricated metals parts to keep you from falling to your death. This is what Joseph Schwartz and Karl Guthrie lived for and how they made their company ClimbTech into what it is today.

Schwartz and Guthrie, both passionate rock climbers, began the Austin, Tex.-based company ClimbTech back in 1998 after years of dreaming up and testing new equipment, mainly springloaded anchors that were designed to fit into holes in the rock and hold up to 5,000 pounds of weight. They soon realized that the products that fit their passion could serve the construction and mining industries, among many others. Now, the mountain-climbing sector only accounts for 5 percent of the company’s business, according to the Austin Business Journal.

Anchoring is as crucial in building commercial structures and navigating metal mines as it is in rock climbing. ClimbTech produces over a dozen products, including removable anchors, swivel anchors and beam clamps.

ClimbTech’s Model RB 1015 Fall Protection Anchor. Source: climbtech.com

ClimbTech’s Mega Swivel 10K. The model on the left is designed for steel; the one on the right, for concrete. Source: climbtech.com

For example, the mining bolt anchor is composed of stainless steel, galvanized cable, aluminum alloy, zinc-plated spring steel and zinc-plated copper, rated up to 7,600 pounds. (Their swivel anchor, shaped into a D-ring and made for 360-degree rotation in concrete and steel anchoring, is made almost entirely of zinc-plated, forged, heat-treated steel and can hold up to 10,000 pounds.) Click here to see how the mining bolt anchor works.

Just yesterday, ClimbTech introduced an array of new products based on their new patent, the MEGA Swivel technology. These include a hybrid swivel anchor (uses a permanently attached “sleeve anchor component that expands in rock/concrete for more stability), a new mining bolt rated to 10,000 pounds and a stainless steel version of the company’s existing swivel anchor which will prevent heavy loads from spreading steel outwards.

Much of ClimbTech’s success in expanding product lines can be credited to current CEO Roberto Fiebig, who realizes how important the founders’ vision for climbing technology is for the industrial mining and construction world. According to the Austin Business Journal, he’s lined up important customers such as 3M.

As for Schwarz, he still designs and patents ClimbTech’s products. “Really, it started with someone coming to us, saying, ËœCan you do this for us?’ he said. “It’s really been 10 years of whittling away and fine-tuning. Finally, you get something slick, he’s quoted as saying in the ABJ.

Who would’ve thought that rock climbers and miners had much in common?

–Taras Berezowsky

Interesting goings-on in the metals world:

Chinese To Build Steel Plant in US — China looks to get around more anti-dumping restrictions by producing more of its steel on US soil. The new Tianjin Pipe Group Plant will cost $1 billion and is expected to produce 500,000 tons of pipe.

New BMW Line Features Aluminum, CFRP aluminum and electric cars are paired up, with the new models i3 and i8 to feature aluminum chassis and passenger cells made of carbon composite material.

Barrick to Buy Equinox for $7.69 Billion, Topping Minmetals Bid Barrick Gold Corp., the world’s top gold company, outbid China’s state-owned Minmetals to secure it’s takeover of Equinox, the Australian copper producer. The mines in Zambia and Saudi Arabia now under Barrick’s control will raise the company’s copper output. This is Barrick’s second-largest acquisition, according to Bloomberg.

Platinum’s prospects to get better and better Leon Esterhuizen of RBC Capital Markets weighs in on why continued supply side worries and growing US car demand may make platinum prices rocket in 2012.

–Taras Berezowsky

We know that 2011 began with a rocky start the Middle East uprisings in Egypt, Tunisia and Libya turned the status quo upside down, the sovereign debt of European nations such as Portugal, Ireland and Greece continues to stoke concerns, and the Japanese earthquake and tsunami in early March caused immense devastation and spawned global supply chain havoc, not to mention the huge debates on the future of nuclear energy

So where will the year go for specific metals? We took a survey of stories by metal to try and figure out what’s important and why:

Aluminum: Output’s up in China and US while prices stay afloat

According to Reuters, China’s daily aluminum production was up 12 percent in February compared to the year before. An official of the China Nonferrous Metals Industry Association also said earlier in March that China will continue to see an aluminum surplus in the next five years production will likely rise 24 percent in 2011 to 25 million tons. Meanwhile, the Aluminum Association reported that US production rose 10.5 percent last month compared to March of last year, and was up 4.8 percent from February’s annual production rate.

Why this is important: Although output looks to continue rising, prices should remain steady or even increase — because of Middle East concerns and worries about power supply in China. (Prices were up to $2720 by April 11, the highest since August 2008.)

Copper: Will China’s demand pullback affect Dr. Copper?

Key developments in the copper world over the last month or so included a number of moves by BHP Billiton (approving a $554 million investment at the world’s No. 1 copper mine in Chile to improve access to better ore grades, and intending to expand Australia’s Olympic Dam mine), according to Reuters.

Why this is important: The International Copper Study Group (ICSG) said at the end of March that “annual copper mine production capacity is expected to reach 24.1 million tons in 2014, rising at an average rate of 4.9 percent a year in the 2011 to 2014 period. So even though the short term demand in China looks uncertain, there is plenty of room for growth in the years to come. Prices should continue to be strong.

Steel: Apparent demand on the up and up

The World Steel Association is rather bullish on global steel demand in the next few years. According to Xinhua, the association says a record demand of 1.4 billion tons will hit in 2012, and its short-range outlook indicated increases in steel use by around 6 percent for both this year and next.

Why this is important: Steel prices may continue their upward momentum after down years after the crash in 2008, especially if the US housing market improves to augment Chinese consumption of the metal.

Gold: $1500 bucks an ounce??

Yep, the benchmark is here.

Why this is important: Stock markets are down all over the world, and S&P just downgraded the US’ debt rating, pushing gold higher if anything, gold’s activity serves as the counterpoint to where industrial commodities could be going. (It may not be pretty, but at least it may be able to tell us something.)

And finally, Silver: Quote of the Week

Perhaps just as astounding as gold’s rise is silver’s meteoric increase. At the CME Group Gold and Silver Dinner, Guy Adami, well known as the original Fast Money Five on CNBC, made it known that anyone betting against gold or silver in this extremely bullish market would lose out big time. He started off his keynote with this: “Anyone who is short silver is going to get their face ripped off.

Why this is important: Silver futures are trading at higher numbers (pushing 81,000 contracts the other day) than ever before, causing quite a stir in the investment community. Also, we must look to inflation control measures to see where metals positions may end up.

–Taras Berezowsky

[youtube]http://www.youtube.com/watch?v=1BDsC53j2_o[/youtube]

Mayor Richard M. Daley of Chicago touts local steelmaker A. Finkl & Sons Co. for staying in the city and retaining manufacturing jobs at a luncheon held by the Alliance for Illinois Manufacturing. Video: Taras Berezowsky/MetalMiner

Big news last week for the Chicago steel industry when US steel producer A. Finkl & Sons Co. received a hefty chunk of change — $20.5 million from the city’s Community Development Commission in TIF money to move operations to the former South Side site of Verson Steel (instead of picking up and moving to Canada). Tax Increment Financing (TIF) is a hot-button issue in Chicago, as many city officials, including outgoing Mayor Richard M. Daley, favor it as a way to incent local business development to spruce up blighted neighborhoods, while detractors say the property tax freeze that the government offers on these properties diverts money from local schools (yet somehow manages to get funneled into the pockets of Daley officials and their favorite developers).

Crain’s Chicago Business reported that the latest approval brings Finkl’s total government assistance to $31 million from the state and the city, which represents about 20 percent of their total spend on the new facility — $150 million. These new operations will boost Finkl’s capacity from a current 100,000 tons to nearly 500,000 tons when all is said and done a sizable boost to the local steel industry. Crain’s says the company will eventually employ up to 500 people at the new plant, and for now, the 350 jobs that the city of Chicago will keep make its TIF offer worthwhile. A Chicago Community Development Commission report mentioned in the article noted that Finkl also requested funds for job training funds, reflecting the conundrum of available industry positions with not enough qualified people to fill them.

But keeping steel mills like Finkl’s and other manufacturing businesses in Chicago and Illinois has been a top priority after Gov. Quinn’s tax hikes forced many companies to think twice about staying in-state. After all, according to the Alliance for Illinois Manufacturing (AIM), Illinois ranks second in number of manufacturers, representing $72 billion in gross regional manufacturing products. A big component of keeping companies in Chicago can be traced to Mayor Daley’s main mantra: let’s make business and government work together and not at cross-purposes, as evidenced by his penchant for privatization.

When the Baron From Bridgeport himself attended a luncheon held by AIM last week, honoring him with a Lifetime Achievement Award, he mentioned Finkl’s new project (among others) — check out the video above — making it clear that manufacturing is near and dear to his heart and so is China.

“It’s amazing how much they’ve adjusted [to become a leading global economy] in the last 20 years, Daley said.

He professed his love for the “inquisitiveness of the Chinese people and how dedicated to foreign investment they are. Daley mentioned that Chinese metal companies are also setting up shop in Chicago, thanks in no small part to his personal initiatives to make Chicago the most China-friendly city in the country.

Whether national partnership with the Chinese is bottom-line beneficial on a trade deficit basis, one thing is clear: getting Chinese companies to employ American workers and retaining the American (steel, etc.) companies paying domestic workers to compete globally is a winning situation, especially for a city with a rich industrial history like Chicago. Daley’s a big reason, through privatization and TIFs, that businesses have been able to at least consider working with or staying in the city over the past two and a half decades.

If you work in, buy from, or distribute to the metal industry in Illinois, leave a comment below tell us what you think!

–Taras Berezowsky

In the US, Europe and Japan, a well-established network of distributors provides a ready route to small and medium consumers for the major metals producers. In some markets such as Europe, manufacturers have a greater wholly owned presence among distributors while in the US it is largely populated by private or publicly owned corporations rather than the metals producers themselves. When working with clients looking to develop low-cost or emerging-market sourcing for the first time, we are sometimes asked why there is not the same network of distributors in Asian markets. Doubtless there are a number of factors, but our opinion has always been that a distributor market only develops when the end-user or consumers reach a critical mass, when there are a sufficient number of usually privately held manufacturing companies looking for the service role that distributors provide.

In state-dominated markets like China and India in the last decade, large sophisticated distributors — as we know them in the US or Europe — were slow to develop where the state could direct their producers to manufacture for major (also state-owned) consumers. But as small- to medium-sized consumers have grown in number and technological sophistication, and as the infrastructure has evolved to allow distributors to cover a reasonable geographic area arguably still a major hurdle in India — more sophisticated distribution firms have become established. Leading this trend have been some of the major western mainline distributors such as Reliance in South Korea, Ryerson in China and ThyssenKrupp Materials in just about every location around the globe.

Well, joining the trend is steel producer SSAB. Once considered a slightly stuffy Swedish steel producer, SSAB has developed into a major global player in the flat rolled products market with a mission to move from the commodity end of the market (the firm is, for example, a significant force in the North American steel plate market) to a supplier of higher-value steels. In a Financial Times article, the firm lays out its twin goals of moving its primary focus from the commodity to the specialty steel end of the market while also establishing itself in higher growth emerging markets. SSAB intends to do this by developing a network of service centers in Asia to capitalize on the region’s infrastructure boom and corresponding demand for high-strength and wear-resistant steels used in the manufacture of cranes, trucks and heavy excavators, according to the FT. The article goes on to outline the company’s plans to push up the proportion of its total revenues that are derived from niche grades of steel to about 60 percent by 2015, up from about 40 percent last year by setting up service centers in a range of countries including China, Malaysia, Vietnam and Indonesia that would be modeled on an existing center in Shanghai. Clearly it feels the existing service centers do not or cannot effectively market the firm’s products or service the major users’ needs.

Last year, SSAB earned only 6 percent of its total $6.4 billion in sales from Asia, with about half coming from Europe and the rest mainly from North and South America, the FT said. But in what it terms ‘niche’ products, such as specialty steels, the percentage from Asia was double those from other markets underlining the demand Asia has for specialty steels. Much of this growth will come from Asia to the benefit of US exports, since much of the “quench and tempered material (which is particularly strong and hard) comes from one of its plants in Mobile, Ala., in the US. Global sales of specialty and high-strength steels are expected to be about 20 million tons this year, worth about $30 billion, according to the article.

To what extent SSAB’s competitors — such as JFE, Nippon, ArcelorMittal and Dillinger Hutte — will follow in setting up service centers in Asia is doubtful, but for SSAB the policy and the objective appear on the face of it to have a lot to commend it.

–Stuart Burns

Events at Fukushima in Japan have put the spotlight not just on nuclear power as a source of energy, but on the storage of nuclear waste. Some of the gravest dangers at Fukushima resulted from spent fuel rods held in cooling tanks that lost fluid and overheated. The world is awash with spent fuel rods being stored in this manner, usually for up to five years while the rods cool to the point were they can be moved, but often for much longer as utility operators struggle to find long-term storage solutions. The Japanese experience has added an additional dynamic to debates in the US about finding a long-term solution and encouraged members in both houses of Congress to try to overcome President Obama’s cancellation of the Yucca Mountain project in Nevada.

According to the Global Security News Wire, the U.S. House Energy And Commerce Committee has started an investigation into the Obama administration’s cancellation of the project while South Carolina and Washington have filed a suit in federal court saying the government has reneged on decades-old commitments to create a long-term store. Opposition to Yucca Mountain within the state of Nevada is probably strong enough to make the project an unworkable solution; as has been shown elsewhere, the support of the local population is key to overcoming planning approval.

In the UK, where the country has been accumulating waste since its first reactor came online in 1956, plans to build a 1000-meter (3300-foot) deep repository in the country’s northwest county of Cumbria has taken a long time, but a decision is expected shortly. Support has built over time such that three communities expressed an interest in the project being sited close to their towns, but then Cumbria has long had ties with Britain’s nuclear reprocessing industry at Sellafield and has become comfortable with the industry being part of its backyard.

Similarly, a Financial Times article describes even more advanced plans to build a depository some 500 meters underground in Sweden in 1.9 billion-year-old rock formations. After 15 years of consultation, two local communities are so keen for the $2.8 billion investment to be made near their towns that they are competing for the project and the jobs that go with it. Under the plan, waste would be buried in copper canisters 500 meters underground, set on granite bedrock with a clay buffer above. The store would be designed to take 6,000 copper canisters containing the used fuel. Building is due to start in 2015 and the first capsules buried by 2020. As in the US, financing has already been raised through a levy on nuclear power.

And therein lies much of the annoyance felt by US states like South Carolina; the US government has been raising the funds for nuclear disposal via $0.0001/KwHr surcharge for years. It doesn’t sound like much but the fund is already at US$24 billion and yet is perversely ring-fenced for the Yucca Mountain project preventing use for other potential solutions such as dry cask storage. According to the WSJ, the US has generated roughly 70,000 metric tons of nuclear waste”enough to fill a football field more than 15 feet deep, according to the Government Accountability Office. The GAO has projected that number will more than double to 153,000 metric tons by 2055 and yet a 2003 report by the Energy Department said it would cost just $7 billion to move all of the movable spent fuel then at U.S. nuclear reactors to dry casks. That is a fraction of the cost of the Yucca Mountain project, which has been estimated at $100 billion, and while not a solution for tens of thousands of years (unless the casks are in a deep depository like Yucca), it is certainly a solution for hundreds of years until technologies develop to make alternative arrangements.

Readily available data would suggest Yucca isn’t quite in the same league as the Swedish location, but is far and away the US’ front-runner. Deep geological disposal requires sites to be highly stable and have no running water due to the risk of container corrosion and possible contamination of ground water in a resulting leak. An alternative to Yucca would need to show the same qualities of extreme dryness found in that area of Nevada and although the site is near a fault line, it is thought to be inactive and several old volcanoes in the vicinity have not been active for a million years. The US does have a similar site in New Mexico, but so far it has only been used for military spent fuel materials.

The subtleties of alternative storage methods may not be the focus of the general public — they will merely want to be assured that whatever the authorities decide as the way forward is indeed a secure, safe and lasting solution, and not an exercise of kicking the can down the road (as we have been doing since the 1980s). For sure though, a storage leak in the US like Japan has suffered would almost certainly put back the industry here by decades just as Three Mile Island has put a moratorium on new reactor builds for the last thirty years.

–Stuart Burns

Although analysts and investors expected aluminum to gradually keep rising, absolutely no one expected the shocking increase in aluminum price — trading on the LME today, it nearly doubled to $4,927 per ton, a record high by a mile.

MetalMiner sources had a hard time determining the exact factor(s) for the spike, but what we’re finding is that the metal is experiencing unprecedented demand due to global turmoil and unrest. Alcoa, for example, will certainly have to raise their prices again — quite a bit, indeed — after already raising their prices in March.

Aluminum is not the only metal making huge waves; copper is up a whopping 27 percent, and nickel and zinc both posted huge price gains.

More on these astronomical increases and the developing causes here.

Just today, the WTO dispute settlement panel essentially voted in favor of several allegations from the EU that the US provided subsidies to Boeing Co. for civilian aircraft that weren’t in compliance with SCA (Subsidies and Countervailing Measures) Agreement rules. This resulted in, the European Communities allege, unfair export advantages for Boeing.

In the most telling passage of the ruling, the panel split the difference between faulting US subsidy and fully siding with the EU:

The Panel upheld the European Communities’ claims that: (a) some of the measures maintained by the States of Washington, Kansas, Illinois and municipalities therein, the NASA aeronautics R&D measures, some of the DOD aeronautics R&D measures, and the FSC/ETI and successor act subsidies, constituted specific subsidies.   The Panel estimated the total amount of these subsidies between 1989 and 2006 to have been at least $5.3 billion;  (b) the FSC/ETI and successor act subsidies constituted prohibited export subsidies; (c) some of the specific subsidies (i.e. the NASA and DOD aeronautics R&D subsidies, the FSC/ETI and successor act subsidies and the Washington State and municipal B&O tax subsidies) caused adverse effects to the European Communities’ interests in the form of serious prejudice, finding that the effect of these subsidies was displacement and impedance (or threat thereof) of Airbus large civil aircraft from third country markets, significant price suppression and significant lost sales.

The panel suggested that the US remove some of the subsidies, which could make a dent in Boeing’s operations in certain states. The EU, mainly on behalf its own home aircraft juggernaut, Airbus, had claimed the subsidies were worth $19.1 billion between 1989 and 2006, but the panel’s drastically reduced estimate, as detailed above, only came to at least $5.3 billion. (The WSJ article on the matter, incorrectly denotes these figures in Euro.) Boeing is undoubtedly one of the larger industrial aluminum and titanium buyers in the world; will this ruling be a major blow to their global ability to compete? Probably not. Nonetheless, it’s another significant mini-battle in the “Airliner Wars between Boeing and Airbus.

–Taras Berezowsky

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